In addition to calculating your monthly subsidy on SAVE, this calculator will help you estimate monthly payments on the SAVE repayment plan.
Because the SAVE calculation will change on July 1, 2024, to charge borrowers less for undergraduate loans, it is necessary to separate undergraduate debt from graduate debt. If you have a consolidated loan, please do your best to estimate which portion of the debt is graduate and which portion is undergraduate.
Subsidy Calculator
What is the Purpose of the SAVE Subsidy?
Historically, many borrowers qualified for IDR plans with monthly payments lower than the monthly interest charges on the borrower’s loans.
When this happened, IDR enrollment could mean that the balance grew considerably.
This made it harder for IDR borrowers to repay their debt, and it created the possibility of a larger tax bill if the debt was forgiven.
With the SAVE subsidy, borrowers don’t have to worry about their balances increasing.
How is the SAVE Subsidy Calculated?
This calculator works by first calculating an estimated SAVE payment and then comparing it to the expected monthly interest charges for the loans.
To understand the basics of the SAVE subsidy, check out this article that explains how it works.
Maximizing the Benefit
If you qualify for the subsidy, the Department of Education suggests making extra payments to attack the principal balance. I think many borrowers would be better off using a different strategy.
Additionally, borrowers who find ways to shelter income from IDR payments can increase their subsidy even further. My favorite strategy is to set money aside in a retirement account.
Do you generally recommend those with high balances file taxes separately if married for the loan repay benefits? We have been filing jointly but at the single rate. Thank you.
It is really hard to say what the “general” recommendation is because each situation is different. Do you both have student loans? Do You have kids? Will filing separately cause you to miss out on any tax breaks?
I’d suggest looking at the different considerations that go into deciding whether to file jointly or separately. I know it might seem complicated at first, but if you read the article that I linked to, the best route will hopefully stand out.
Also, if you both have student loans, this article tackles the tax status question for couples who are both on IDR plans like SAVE.
Feel free to reach out again if those two articles don’t answer your questions.
When I go to Consolidate my loans and choose the SAVE option instead of IBR, it shows the 20 years starting from today instead of 2011 when my loans went into repayment. Is that correct? Will all of my payment years be negated?
Many of the federal tools mistakenly assume that borrowers will be starting repayment for the first time when they enroll in an IDR plan. You will still keep your years of progress toward student loan forgiveness.
One more question– once I am on SAVE, my balance won’t grow any more? It started at $118,000 and is now at $180,000. I want to be clear to best save for that TAX bomb?
Correct. As long as you are on SAVE and making the minimum required payments your balance will not grow due to the subsidy.
This makes SAVE a great option for the tax bomb. I’m still hopeful that the tax bomb never happens, but I have a backup plan in place in case I do get hit with a large tax bill.
This is huge! Looking at a Tax bomb on 180k vs 300+K is amazing news!
Bingo! Even if you plan on getting forgiveness, the SAVE subsidy is a game changer.
Wow Mike! This is extremely helpful. Right now I have a balance of $180,000 with 7.65% interest. My AGI is about $86,000. Right now I pay $440 on PAYE. When I called to look into SAVE they asked for both me and my husbands income- and said my payments would increase to $720. This year we plan to file separately.
Is there anyway I can get this lower payment BEFORE July 1,2024?
One option would be to file your taxes as soon as possible in 2024. Once you have filed seperately, you can get a SAVE payment based only on your income.
You’re the best. Thank you!